Implications of Idea Cellular Fundraising

     NewsPatrolling.com (Best influencers marketing campaign  platform) / Glamourtreat.com : “The fund raising plan of Rs 3,250 cr with an enabling resolution to raise Rs 3,250 cr will definitely aid idea cellular in terms of deal apprising in their balance sheet. The move was also necessitated by the fact that idea needed to ramp up its product offerings and at the same time strengthen its infrastructure requirements. The pre-merger talks and the merger with Vodafone is a continuous process which will go on for the next few quarters. The competition in terms of a new entrant offering a better and a more efficient product necessitated the ramping- up of this investment.This clearly is an indication that the management is very hopeful that only a small group of players will remain. Out of them, the top 3-4 players will need to strengthen the infrastructure network in terms of spectrum offerings as well as product efficiencies to facilitate customers to migrate to the new network for which additional capital flow is a primary necessity. Its evident from the revisions in pricing by Reliance Jio that the telecom industry pricing competition pressure is almost nearing its end. What it also indicates is as data consumption grows exponentially across circles, the existing telecom players will also benefit.

 

The only issue that plagues the balance sheet is excessive debt in terms of spectrum liabilities as well as liabilities for operating purposes which create a huge burden on their cash flows. After what we have seen in the telecom industry over the past few quarters and years, you should see cash flow steadily increased though the operations elements will still remain extremely high and net-debt to EBITA levels will also remain high exponentially. In my opinion, it was an exercise which was mandated both in terms of upgrading the network as well as creating better services in terms of bandwidth and efficiencies to be offered to their customers to compete with the competitors.”